Characteristics

The major characteristics of a corporation are:

• the power to acquire, own, and dispose of assets in the corporate name;
• the power to sue and be sued;
• continuous existence, despite the death of individual shareholders;
• limited liability of the shareholders; and
• centralized management of assets by directors and officers.

Articles of Incorporation and Organizational Meeting

The first step in the formation of a corporation is the filing of the articles of incorporation with the Secretary of State by the incorporator or incorporators. 

Any natural person or persons, or any domestic or foreign corporation may act as incorporator.

The name of the corporation must be listed.  The name must contain the word "corporation," "company," "incorporated," or "limited," or an abbreviation of one of these words.

The purposes for which the corporation is formed must be stated, which may be stated to be the transaction of any or all lawful business for which corporations may be incorporated.

The relevant information regarding stock must be set forth, including the total number of shares and the par value, if any, of each class of stock that the corporation is authorized to issue.

The articles must state the period of duration of the corporation, which may be perpetual.

The articles of incorporation may contain any other lawful provisions specified by the incorporators for the regulation of the internal affairs of the corporation.

The articles are to be submitted to the Secretary of State.  If the articles comply with the legal requirements, he issues a certificate of incorporation to the incorporators or their representatives. Upon issuance of the certificate of incorporation, the corporate existence is deemed to have begun.

The certificate constitutes conclusive evidence that all conditions precedent required to be performed by the incorporators have been complied with.

After the issuance of the certificate, the board of directors named in the articles must hold an organization meeting for the purpose of adopting bylaws, electing officers and transacting other business that comes before the board.

By-Laws

By-laws are internal rules and regulations enacted by the corporation to govern its actions and its relation to its shareholders, directors, and officers. 

By-laws may include any provisions for regulation and management of corporate affairs not inconsistent with law or with the articles of incorporation.

The power to alter, amend or repeal the by-laws or adopt new by-laws, subject to repeal or change by the action of the shareholders, is vested in the board of directors unless reserved to shareholders by the articles of incorporation.

By-laws often specify the time and place for the annual shareholders' meeting; the record date for determining shareholders entitled to vote at meetings or to receive dividends; the number of shareholders necessary to constitute a quorum;  the percentage of votes necessary to authorize corporate action; and any restrictions on transferability of shares.

Defective Incorporation

A corporation organized in compliance with the statute is a de jure corporation.  Failure of the organizer to comply with a mandatory statutory provision will preclude de jure status.

If compliance is insufficient for de jure status, a de facto corporation may exist if a good-faith attempt was made to comply with the incorporation statute, and if the principals in good faith acted as if they were a corporation.

De facto status insulates directors and shareholders from liability except in a direct action by the state. 

Absent de jure or de facto status, a corporation may still exist by estoppel (corporation by estoppel).  If a creditor always dealt with the principals as if they were a corporation, he will be estopped to later allege the corporation is defective if that would unjustly harm the principals.

The estoppel doctrine is not a defense to a tort claim, since the claimant has not previously dealt with the principals as if they were a corporation.

If, through a defect in incorporation, no corporation was formed, those attempting to act as a corporation may be held personally liable.